Tracing the evolving law and business of TV

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On Jan. 26, 1926, Scottish inventor John Logie Baird gave the first public demonstration of a mechanical television system. In recognition of a century of television history, Penn Today spoke with Wharton School professor Barbara E. Kahn about shifts in TV branding and Penn Carey Law professor Christopher S. Yoo about the history of TV’s legal landscape.

The major broadcast networks that at one time dominated television—ABC, NBC, and CBS—created broad brand awareness through advertising and programming with mass appeal, says Kahn, a scholar of brand loyalty, consumer decision-making, and retailing. Everyone was watching the same shows at the same time, and there were only a few to choose from.

But the reverse is now true. Today there are many networks and streaming services, and loyalty is built through customized programming and suggestions for each viewer, Kahn says. Sometimes shows have broad appeal, but the market is much more splintered. One implication of this is that audiences see and hear fewer points of view, contributing to increased polarization, she says.

Kahn notes that marketing has also become much more sophisticated, particularly as streaming services promote targeted programming based on analytics of viewers’ prior habits. This ties into a broader marketing concept: Companies grow by going back to their initial customers and selling them more.

Laws not keeping up with changes

The legal regulation of television really began in 1952, says Yoo, an expert on law and technology. This was when the Federal Communications Commission (FCC) allocated more than 2,000 new local TV stations nationwide, following a freeze in broadcasting and manufacturing during World War II.

Yoo joins many other scholars in considering the decision to create so many local stations “regrettable.” That’s because whereas regional broadcasting might have resulted in seven or more viable networks, he says, the localized system resulted in the ABC-CBS-NBC triopoly that lasted until the launch of Fox in 1986. Moreover, the high up-front costs of producing TV shows, combined with audiences across the country preferring the same programs, meant that local control provided few advantages for viewers.

The 1950s and ’60s saw an expansion of content regulation, particularly with respect to children’s television mandates, restrictions on indecent programming, and privileges for federal political candidates. “Broadcasting has some of the lowest levels of First Amendment protections for reasons that the Supreme Court and most scholars now regard as largely spurious,” Yoo says.

The FCC tried to halt the development of cable television in the ’60s and ’70s, erroneously fearing this would hurt weaker broadcast stations. But courts paved the way for the ascension—and regulation—of cable in the 1980s.

The past two decades have seen the rise of streaming services, also known as online video distributors (OVDs), like Netflix and Hulu, which do not face the same burdens as broadcasters or cable operators. Those include paying franchise fees to cities, providing public access channels, and supporting disability access.

“Congress may eventually have to enact a statute that brings all of the various types of video distribution into a single, consistent regulatory framework, because right now, the idea that OVDs do not compete with cable is nonsense,” Yoo says. Cable laws were last significantly revised in 1996, and “many provisions may need to be rethought if not abolished altogether,” he says.

The story of OVDs remains a work in progress, Yoo says. The success of Netflix led many media companies to establish their own distribution platforms and invest heavily in programming. Their subsequent failure to hit their target subscriber numbers has led the industry to go through a period of reorganization and retrenchment, with the ultimate resolution yet to be determined, he says.